Would an outsourced accounting service, rather than an internal accounting department or a CPA firm, be beneficial to your company? Accounting gives your firm the data it needs to make better decisions, stay compliant with regulations, and maintain its image with employees, potential investors, and the general public. It also aids cash flow management, timely payment of employees, and account receivable management. Accounting methods are frequently the deciding factor between successful and failing businesses.
At the same time, most CEOs and business owners must weigh these benefits against their financial constraints. Outsourced accounting services have become increasingly popular among businesses of all kinds in recent years because they offer a cost-effective, scalable, and efficient solution to handle accounting.
At Peter Leow Consulting, we strive to be as transparent as possible regarding the advantages and possible disadvantages of hiring an outsourced accounting team for the average Singapore company. Read on to learn more about the pros and cons of using outsourced accounting services based on our professional knowledge and experience:
Advantages of Using Outsourced Accounting Services
Accounting requirements evolve with time. For many businesses, they can even fluctuate dramatically depending on the season. For many firms, this exemplifies many of the advantages of outsourcing accounting. Other advantages of outsourced accounting include:
Hiring an outsourced accounting service is usually less expensive and more cost-effective than getting in-house financial personnel. You avoid the related overhead costs of hiring an employee, such as PTO, health insurance, retirement, vacation, Workers’ Compensation, and sick days, by outsourcing. Additionally, having a full team’s experience rather than just one (or more) internal person’s competence reduces the danger of non-compliance and incorrect financials, which is especially important for small enterprises just getting started.
2. Ability to be more proactive
As a company director or CEO, you didn’t start a company to be a skilled financial professional in charge of the books, did you? You want to operate your firm and concentrate on the company’s overall growth and vision. This is why having an outsourced accounting team gives you the advantage of proactivity, as they can notice red flags ahead of time and alert you to things like expenditures and cash flow. Having an extra set of eyes on your finances at all times may provide a great deal of peace of mind, as well as the confidence to make sound financial decisions.
3. Decreased fraud
In many small to medium-sized enterprises with only one person in charge of accounting, fraud is an undesirable effect. That’s because it’s simple to tamper with the books or allow a fictitious expense to go unnoticed for months, if not years. There are a variety of warning indicators that can indicate fraud, and they are frequently the result of an employee’s financial struggle when they are unsure what else to do. Don’t just trust your staff without any checks or balances in place – it’s a certain way to make yourself vulnerable to fraud.
You have many sets of eyes on your transaction processing and reports with outsourced accounting services, which increases internal controls. While fraud cannot be completely eliminated, a committed team with specific knowledge of accounting best practices is significantly more likely to notice an abnormality than a single person who is likely overworked.
Disadvantages of Using Outsourced Accounting Services
However, outsourced accounting services don’t come without their own pitfalls. It is important to consider which disadvantages of outsourcing accounting services that apply or don’t apply to your company when deciding whether or not to outsource your accounting services. Here are among the most common disadvantages of outsourcing your accounting services:
1. Hidden cost
Scope creep can occur with any paid service, where one work turns into several, resulting in additional costs you weren’t aware of at the outset (or forgot about). Make your month-to-month transactions or engagements clear and set expectations from the start to reduce the chances of this happening.
2. Less control over financial matters
There is a catch to an outsourced team’s proactivity: you can’t walk down the hall and inquire about every single financial event that occurs. Surely, you’ll be able to contact your account manager, receive weekly updates, and monthly reports, but trust in your outsourced relationship is required.
It can be difficult for business owners to relinquish control of their financial records to an outside service. Starting with a thorough onboarding process that clearly outlines responsibilities, policies, and procedures establishes expectations and guarantees timely communication.
3. Lack of direct communication
There are, of course, advantages to having an employee on staff who can respond to inquiries quickly. While an outsourced workforce is available, responses are not always immediate. Because they are not in the same office, there may be constraints.
However, a good outsourced accounting firm should have solid communication procedures in place to guarantee that your team is always available and accessible. It’s critical to weigh the options and decide which is more important: an immediate response or taking the time to get the right answers.
If you don’t set up a communication schedule and obligations with your outsourced provider before you start working with them, your outsourced relationship will be shaky and difficult to manage. Take the time to talk about it, including your objectives.
Just like any freelance/outsourced services that are meant to take your burden off managing your company matters, outsourcing your accounting will also come with certain pros and cons that have to be taken into account before making the decision whether or not to engage in an outsourced accounting service. Need more information about our outsourced accounting services and how your company can benefit from them? Get in touch with us to know more!